Some basic concept of taxation and

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Some basic concept of taxation and

See Article History Income tax, levy imposed on individuals or family units and corporations. Individual income tax is computed on the basis of income received.

It is usually classified as a direct tax because the burden is presumably on the individuals who pay it. Corporate income tax is imposed on net profits, computed as the excess of receipts over allowable costs.

As an instrument of national policy, the individual income tax has played different roles in different countries at different times, beginning in Great Britain at the close of the 18th century.

Finally, in most countries it has been used to redirect economic decisions through preferential treatment of various activities. It can also act as a stabilizer against economic fluctuations because its effect on purchasing power varies inversely with changes in income and employment.

The meaning of income

For example, a person who experiences a reduction of Some basic concept of taxation and due to a job loss will typically owe less in taxes; the employed person will pay more in taxes but will have more income available for purchases. More recently, however, opinion has shifted away from the view that the income tax should be used for these purposes because of the costs involved, in terms of disincentives and other distortions of economic behaviour.

Regarding income taxes on corporations, nearly all countries assess them, but the provisions and rates differ widely. Since industrialized countries generally have larger corporate sectors than less-developed countries, corporation income taxes in developed countries tend to be greater in relation to national income and total government revenue—except in major mineral-producing areas of less-developed countries.

The United Kingdom for a long time applied the income tax on corporations companies purely as a supplement to the taxation of individuals. Shareholders had to pay tax on dividend income only to the extent that the rate of individual tax applicable to such income exceeded the corporate rate; they received refunds if that rate was less than the corporate rate.

Some basic concept of taxation and

This system was modified in and replaced in by a separate corporation tax. In the United States the federal corporation income tax, adopted inpredates the modern individual income tax authorized by constitutional amendment in Before World War II the corporate tax usually yielded more revenue than the individual income tax, but this had changed by the beginning of the 21st century, when the individual income tax produced about five times more revenue than did the corporate tax.

About three-fourths of U. Compared with the amounts produced by sales taxes or wealth taxes, the receipts from the individual income tax tend to rise more steeply in economic booms and drop more sharply in recessions. This occurs in part because individual income itself is quite sensitive to changes in the level of overall economic activity.

In addition, income taxation is regulated by a progressive rate structure which can be thought to include the personal exemption as a zero tax rate.

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As a result, a rise in individual income creates additional income that is taxed at a higher rate. Conversely, a drop in individual income causes some taxpayers to be taxed at lower bracket rates.

Exceptions to a tax code—such as deductions, the indexation of exemptions, and the measurement of income from capital for inflation—reduce the potential for stabilization. See progressive tax ; regressive tax. The individual income tax reduces the amount of income individuals have available to spend, save, or invest.

Of course, any tax has this result. The question is whether other taxes may achieve the same end more efficiently or with fewer undesirable side effects. It has been argued that a tax on income discriminates against saving and is less favourable to economic growth than a tax on spending because an income tax is levied on all income—even that which is saved and made available for investment—while a consumption tax is not levied on moneys that are put into savings.

On the other hand, an income tax does not distort consumer spending patterns the way that selective excise taxes tend to causing buyers to shift from taxed to untaxed items.

The income tax does, however, contain distortions and inequities of its own.

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It is difficult to determine the extent to which an income tax reduces the incentive to work. To the extent that the tax reduces total income after taxes, it may lead some persons to work longer in an effort to maintain an established standard of living the income effect.

Finally, a progressive income tax is sometimes said to have an adverse effect on investment, especially in the case of risky ventures, but this has been shown to depend on the provisions a tax law makes for allowing investors to write off their losses.

The meaning of income Whether income is an accurate measure of taxpaying ability depends on how income is defined. Tax experts commonly call this the Haig-Simons definition of income, based on work by American economists Robert M.

Haig and Henry Simons. This definition cannot be applied without important modifications. First, many tax codes do not consider as taxable income those changes in net worth resulting from gifts, bequestsand other gratuitous transfers.Basic concept of Income tax in India individual has to pay tax of relevant previous year in assessment year before 31st July (in 4 months).

If he pays after this date than he has to pay penalty for late payment. Brief Note on Double Taxation Relief under Section 90, 90A and 91 The Meaning & the Concept: The situation of double taxation will arise where the income gets taxed in two or more countries where due to residency or source principle as the case may be.

The DTAA is based in four basic models of DTAA and they are – OECD Model Tax . Basic Concepts of Taxation. Learning Objectives. Thus the calculation of adjusted gross income and deductions can be quite complex. For all individuals, however, the basic relationship still holds: taxable income = adjusted gross income − (deductions and exemptions).

There are various tax credits for which some individuals are. Basic Conflict of Laws 1 Principles Robert C. Lawrence, III Elisa Shevlin Rizzo I.

Introduction This chapter provides an overview of some of the conflict of laws. – Quick Recap. Reiterating from the previous chapter – You can classify yourself as an Investor if you hold equity investments for more than 1 year and show income as long term capital gain (LTCG).

A basic income, also called basic income guarantee, universal basic income (UBI), basic living stipend (BLS), or universal demogrant, is a type of program in which citizens (or permanent residents) of a country may receive a regular sum of money from a source such as the government.

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